Graduate School Of BusinessFaculty of Business & Accountancy

University of Malaya

CSGB6201 Strategic Management

PMCare Sdn Bhd : What’s The Future

Like ?

Prepared by:

Khairul Anuar Mohd JuriMuhammad Zia Aslam

Ungku Mohammad Alhady Ungku Mohd Zam

Debra MesaSalem Abdullah

Prepared for:

Dr. Syed Zamberi Ahmad

TABLE OF CONTENTS

Overview of the Study__________________________________________1

1. INTRODUCTION___________________________________________2

1.1. Why PMCare:_____________________________________________3

1.2. Corporate Social Responsibility:______________________________5

1.3. Types of Products and Services:______________________________5

2. ISSUES / PROBLEMS_______________________________________6

3. ENVIRONMENTAL SCANNING______________________________7

3.1. Industry Analysis:__________________________________________7

3.2. Porter’s five forces Model:___________________________________9

3.3. Internal Analysis of the firm (SWOT):________________________11

3.4. PEST Analysis____________________________________________14

I. Entering UAE (Dubai)_______________________________________14

II. Entering Jakarta, Indonesia__________________________________18

4. Strategy Formulation and Implementation______________________21

5. Evaluation & Control_______________________________________23

6. Conclusion_________________________________________________24

1

Overview of the Study

In today’s highly competitive business environment, firms must engage in strategic

planning that clearly define objectives and assesses both the internal and external situation

to formulate strategy, implement the strategy, evaluate the progress, and make adjustments

as necessary to sustain company’s growth and competitive advantage.

We adopted a simplified strategic planning process for the company under this study,

PMCare Sdn Bhd. Our strategic planning process for PMCare will consist of following

steps:

1. Mission and Objectives (Introduction): Mission statement serves as the

guideline for the whole strategic planning process because it describes

company’s business vision, values, and forward looking visionary goals.

2. Environmental Scan: Environment scanning is a very useful technique, done

through different tools, to gather and analyze relevant information that will

ultimately help the organization in its planning process. We will use SWOT

for the internal analysis of PMCare and Porter’s five forces model for the task

environment i.e. analysis of the related industry. Moreover, PEST analysis

will also be used for the external macro environment to address one of the

issues in our study.

3. Strategy Formulation: Based on the information from the environmental

scan, we will formulate a strategy for PMCare that best match its strengths to

the opportunities while keeping in mind weaknesses and external threats.

4. Strategy Implementation: There is no use of any strategy if it is not

implemented efficiently. We will give recommendations to avoid formulation-

implementation gap for the company.

5. Evaluation and Control: Implementation of the strategy must be monitored

carefully so that necessary adjustments could be made on time.

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1. INTRODUCTION

PMCare is a Business Process Outsourcing (BPO) provider, a pioneer in the concept of

Managed Care Organizations (MCOs) in Malaysia. It was incorporated on February 28,

1998 under the name of HMO Pacific Sdn Bhd and was named PMCare Sdn Bhd on

January 16, 2004. PMCare is involved in the management and administration of various

healthcare programs for its corporate clients.

Business Process Outsourcing (BPO) fundamentally means to outsource the activities

that are not part of the organizations’ core competencies or business structure. BPO is

positively related to the search for more efficient organizational design, cost reduction,

productivity growth and innovative capabilities and, most importantly, is a source of

strategic advantage. Health care (MCO), back office functions, HR functions, marketing

activities and IT functions are some of many examples of business process outsourcing.

Managed Care Organizations (MCOs) are the ones who have necessary expertise and

solutions to provide cost effective and quality healthcare delivery systems. Providing

quality medical care is an integral part of company policy for a healthy and productive

workforce. Moreover, medical care incentives play a vital role in meeting recruiting

targets and retaining employees, thus, consequently maintaining the competitive advantage

of best human capital. So, keeping in mind the importance of healthcare services, it is

impractical for large organizations to manage their own medical benefits for the

employees and is better to outsource the activity for better management so that company

could focus on its core business competencies.

Corporate Mission:

To build healthier communities by efficiently managing the delivery of

quality and affordable healthcare through a dedicated network of caring

providers

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To establish a standard framework for network providers and standards

claims procedure that is common to all payers

To provide a challenging and progressive working environment for our

employees

To maximize shareholders value by striving for excellence in every aspect of

our business management

To be a responsible and caring contributor to society

1.1. Why PMCare:

PMCare has the necessary expertise and solutions to provide cost effective and quality

healthcare delivery systems through its integrated healthcare practices. Central

management tracking system of PMCare, called Medicare Integrated Information

Exchange (MiX), is an efficient data management tool and essentially a competitive

advantage for the company. MiX was designed and developed by PMCare in 1996, and

has been continuously under improvement through research and development, on the

specific requirements of the corporate clients of the company. Because of the flexibility

and robustness of MiX, PMCare is able to manage and administer various combinations

and permutations of healthcare benefit entitlements of the employees of its corporate

clients.

PMCare provides online support and assistance to all its stakeholders, including GP clinic

partners, corporate clients and their healthcare entitled employees, through its web based

solutions called Mediline and Medifile.

Mediline is a web based application system to assist and facilitate the panel medical

providers to verify and validate members, online claim submissions and generate claims

summary reports which can be used as a statement of accounts.

Medifile is a business intelligence system that collates and manages information given to

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the company, and produces reports for analysis by the relevant member organizations. Its

web based feature allows it to be accessed from anywhere in the world, 24 hours a day.

The reports are confined to the data of the respective clients only and are provided in two

different types. Tier 1 is the KPI type of reports which are useful to the heads of

organizations with color coded to signify the status of the data for example red is for

urgent actions need to be taken. Tiers 2 are the detailed reports which are useful for the

middle management to keep a close eye on the healthcare service practices. These reports

serve as the personal ledger of all the members and, also, provide useful information to the

respective organizations about the average utilization of the services, the trend of diseases,

type of medication used mostly, and average cost per treatment etc.

Given below is the overall graphical representation, generated by Mediline web based

system, of number of medical providers used and the amount paid to those providers in

years 2006 and 2007 on monthly basis.

Figure 1 : Statistics Of Total Number Of Medical Providers & The Related RM Amount Incurred

(Source: PMCare website) (Source: PMCare website)

Hence, the information given above provides the solid reasons for PMCare to be a leader

in Medical Care Organizations’ industry in Malaysia and to be the first choice for large

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organizations to outsource their healthcare activities.

1.2. Corporate Social Responsibility:

Healthcare management is a sensitive activity to handle, therefore, PMCare does not only

administer medical benefits for the employees and eligible dependents of corporate clients

it also educates the employees of its corporate clients through health care talks and forums.

These health talks and forums provide the basic healthcare knowledge to the members and

help them adopt a healthy life style. Although there is a long list of health talks conducted

by PMCare for its corporate clients on their own premises, educating about specific

diseases like cancer, conducting seminars on work stress, and first aid trainings are some

worthy healthcare education programs conducted by the company.

Continuous Medical Education (CME) program of PMCare depicts the commitment and

responsibility of the company towards professionalism as well as society. The company

believes that the knowledge explosion in every field of medicine will affect the way a

patient or disease is managed over time and a doctor needs to regularly update his or her

knowledge and skills. CME programs are conducted in cooperation with the company’s

partners like Glaxo Smith Kline (GSK), Pfizer, Roche, and panel hospitals in company

office, partner hospitals and hotels.

PMCare also contributes for community health through Bank Simpanan Nasional (BSN)

community projects called BSN PRIHATIN program. PMCare provides a mobile health

examination and consultation clinic for these programs.

1.3. Types of Products and Services:

PMCare provides three types of products to its corporate clients:

Third Party Administration (TPA): is a kind of service that only manages the healthcare

services, as a third party, of self-insured customers but all actual medical expenses are

borne directly by corporate clients.

Fully Insured Program: in these kinds of services the members are fully insured by an

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appointed licensed insurer and PMCare manages each and everything from healthcare

service to payment of expenses for medication.

Combination: a combination of third party administration and fully insured program is

also used by the company.

Along with services mentioned above, PMCare also provides advisory services to its

corporate clients in areas related to human resource and employee benefits.

2. ISSUES / PROBLEMS

We have gathered information on PMCare Sdn Bhd through interview with the Chief

Operating Officer, Mr Kamal Aryf Baharuddin, and other secondary sources as well. As

told by Mr Kamal during the interview, PMC holds about 45% of market share, 2nd to ING

that holds the position of market leader with 50%. However, PMC is only involved in

healthcare management business and ING is a big insurance company involved in

healthcare business also. So, first of all, PMC wants to be the market leader in Malaysian

market. Mr Kamal also told us that PMC has been invited by some organizations from

Jakarta (Indonesia) and Dubai (UAE) to join hands for the healthcare management

business there and the company is looking in these business opportunities seriously. But,

as he said, it is not an easy decision to make for the company.

Hence, based on the interview & analysis of the secondary sources, it has been agreed that

the issues & problems of PMCare Sdn Bhd given below are needed to be managed

strategically.

• How to position PMCare to be the leader in the managed care business in

Malaysia?

• Is it the right time to expand business operations to Jakarta (Indonesia) and Dubai

(UAE)?

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3. ENVIRONMENTAL SCANNING

Now, focusing on the found issues, we will try to analyze the overall business environment

for PMCare and formulate a business strategy to address the same.

3.1. Industry Analysis:

In Malaysia, the healthcare industry consists of 4 segments which are the healthcare

services, pharmaceuticals, biotechnology, medical devices & equipment. Basically in

Malaysia, the providers of healthcare are the Ministry of Health, Private Sector and other

government’s agencies as well such as the Ministry of Defense and Ministry of Education.

i. Nature of the Industry:

Malaysia has one of the most heavily funded government health care systems in Asia. The

initiatives for the healthcare industry that have been provided by the government include

among others

o An Allocation of USD 2.8 billion in 9th Malaysian Plan (9MP) as compared

to USD 2.5 billion in 8th Malaysian Plan (8MP)

o A subsidy given on 97% of drug purchase in Government Hospital totaling

USD 210.5 million annually

o Low consultation fees in government hospital that run about $0.25 to $1.20

o NGO is provided financial assistance for health related activities worth

$6.58 million per year

o 98% subsidized of the total cost of health services.

Based on the 8th Malaysian Plan, various aspects of healthcare programs in Malaysia that

are given special attention such as focus placed on improving access to health care

services for all, especially for people in the rural areas. At the same time, the private sector

is encouraged to expand their coverage of health services to complement the public health

sector. Regulatory mechanism is also to be in place to ensure quality healthcare is

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provided at a reasonable cost by both public & private sector. For 9 th Malaysian Plan, the

projects that have been planned include among others, efforts of preventing & reducing

the disease burden, enhancement of research and development to support evidence-based

decision making, improving healthcare delivery system and to increase the effectiveness

of healthcare related crisis and disaster management. In addition, priority is also given to

human resources development as well as strengthening the health information &

management system.

ii. Managed Care Business in Malaysia:

In Malaysia, managed care organizations (MCO) operate for private sector. According to

the Director General of Health Malaysia, the current total number of MCOs in operation in

Malaysia is estimated at 56 companies. However, only six of them are registered with the

Ministry. It is also estimated that the MCOs in Malaysia currently to have 1.5 million

enrollees.

There were many MCOs that had been entering & exiting the industry. This scenario is

believed to have related to incapability of the companies to keep proper records and

accounting of their financial performance.

For some other MCOs, the increasing health expenditure which is caused by among

others, doctors’ fee, patients’ demands, staff wages, rentals of premises, prices of

pharmaceuticals and medical devices, and compliance with regulatory requirements helps

them to stay competitively strong in their business operations. Being in the industry, these

MCOs generally applying certain marketing strategies which include offering cost

containment to their customer, providing management of employees’ medical benefits and

also promoting quality healthcare services.

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iii. Growth & Regulations:

In term of growth, the managed care business in Malaysia was at it’s infancy in 1995 and

currently is booming and expanding towards maturity stage. Managed care business in

Malaysia is governed by the Private Healthcare Facilities and Services Act 1998 and its

Regulations.

iv. MCO in Malaysia:

Apart from PMCare Sdn Bhd, among MCOs in operation in Malaysia are ING Berhad, a

multinational company which is also considered as the main player, Medijaring Sdn Bhd

& Mediscreen Sdn Bhd.

v. Controversies in the Malaysia’s Managed Care Business:

The reluctance of many operating MCOs to register with the Ministry of Health has

caused a concern to the ministry because of several unresolved issues related to the way

these MCOs are operated. Firstly, issue of licensing of MCOs under Act 586 which is

important in term of regulating of managed care activities, could not be well implemented.

Secondly, the Fee Splitting issue that has caused a hot debate between Medical

practitioners and Managed Care Organisations. In this case the fee splitting comes in the

form of arrangement made by parties with the intent of inducing the relevant parties to

refer or receive patients from one another. Since it is prohibited under the Private

Healthcare Facilities and Services Regulations 2006 and the Malaysian Medical Council’s

code of professional conduct, a hot debate has erupted between the Joint Inter-Hospital

Healthcare Committee (JIHC) and ING Insurance Bhd and sadly the matter is still left

unresolved.

3.2. Porter’s five forces Model:

Michael Porter’s five forces Model is the best choice for the analysis of task environment

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of the company because it evaluates entry barriers, suppliers, customers, substitute

products, and industry rivalry. In this industry the barrier for a company to enter the

market is not exist. It’s easy to enter the market, the only problem is how to sustain & to

compete with the other two giants in the industry. Based on this aspect, the entry barrier

for the managed care industry is low and yet less impact of threat posed to the industry’s

few existing companies. In term of bargaining power of suppliers, it is considered low

characterized by the nature of the industry itself which is a service sector. Customers in

this industry consist of corporate organizations and also the healthcare providers. Their

bargaining power is considered medium based on the fact that customers still have options

& alternatives to change MCOs providing the same service. However the few number of

major players in the industry lessen the options available for customers and thus lowering

the bargaining power for them. When referring to substitute products, it relates to whether

any method that is available which can replace the providing of such service, there is none

at the moment due to a distinct nature of the service . In current situation of the industry,

there are only few major players operate in the market. Specifically, only two companies

i.e. PM Care and ING Berhad that are seem dominating the managed care industry in

Malaysia. In this aspect, although the two companies competing each other in term of

grabbing the market share, it can still be said in general the competitiveness of the industry

landscape is low because of the low number of firms operating in the industry. In

summary, the industry five forces characteristics are illustrated as in the following table.

Figure 2: Applying The Five Forces Model To The Managed Care Business

Threat of entry Threat of

substitute

Bargaining Power

of Supplier

Bargaining Power

of Customer

Competitive

Rivalry

Low Low Low Low Low

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3.3. Internal Analysis of the firm (SWOT):

In order to answer the 1st issue of positioning PMC to be the leader in the management and

administration of the delivery of healthcare in Malaysia; we use SWOT analysis to provide

a detailed insight into the strengths and weaknesses of the company and will clarify the

opportunities and threats need to be carefully managed.

PM Care aims to be the leader in the health care industry in Malaysia, however, in

becoming the industry leader, PM Care (PMC) should have the capabilities and qualities

of a leading company. Therefore, we need to look at PMC strength, weakness, opportunity

and threat in the industry.

i. Strengths:

Several PMC’s strengths that has been noted :

a) Medicare Integrated Information Exchange (MiX):

This is the in-house system developed by PMC. It is a highly flexible system that is used

to administer the members’ database, processing the claims submitted by their clients.

MiX contains the latest information about costs and services available throughout the

country from the medical providers. It is continuously updated and can be very useful to

their clients and medical provider as both can have a same medical track record of every

employee and patient.

Apart from that, PMC also have Mediline; a web-based application system which also

developed by them for the purposes of:

Verify the eligibility or validity of members; this prevents unauthorized or

fraudulent practice and protects the interests of clients.

Submit medical claims on-line to PMC; this provides instant access which

means information can be supplied and analyzed on demand.

Generate reports on claims summary which can be used as an invoice

or/and statements of accounts.

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b) Access to over 2,000 Medical Providers:

PMC has a large network of affiliated medical providers located nationwide. To date it has

about 2,000 medical providers who are attached with them. PMC thus has taken over the

job of their clients in appointing or terminating the medical providers. The members then

can have the access of these medical providers that suit them. Moreover, the medical

providers also enjoy the benefits of centralized claims submission done by PMC for them

rather than submitting their claims to various organizations.

c) 24 hours customer care-line:

PMC’s 24-7 customer careline 1300886868 is to cater the needs of their members, clients

and medical providers. The center provides services from preparing the guaranty letter for

members to finding the nearest medical providers for them. Thus it helps the members in

need very much.

d) Large number of Members - 450,000

PMC has strong corporate clients e.g. Celcom, Telekom Malaysia(TM) and Bank

Simpanan Nasional(BSN) allowing them owning a large number of members of about

450,000. With these large memberships, the medical providers enjoy the most especially to

individual general practise.

ii. Weaknesses:

Even with their competitive strength, PMC has their own setback. Their major weaknesses

that have been identified are:

a) High staff turnover

PMC customer care-line department is facing the problem of high staff turnover. This is

mainly due to the job requirement which required them to work in shift and also the

recruitment always looking for fresh graduates who eventually taking the job as their

stepping stone.

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b) Small marketing personnel

PMC depends too much on networking business that mainly holds by their marketing’s

people. Having small number of personnel in the marketing department can be a problem;

iii. Opportunities:

The healthcare industry in Malaysia is still growing. Even though the numbers of players

are quite large, at least 56 as estimated by the Ministry of Health, the active and registered

companies with Ministry of Health are only six. Therefore there is a broad market to

penetrate in Malaysia.

However, PMC can also consider of venturing into overseas market as their expansion

plan. They have the capabilities of venturing into overseas market with the right time and

opportunity.

iv. Threats:

PMC however, facing few threats to its business. The main threat is the short-term contract

of one year that they have with most of their corporate clients for example; Celcom. Thus

they do not have the certainty of revenue for the coming year.

Based on the interviewed with the COO, he mentioned that there is a possibility that

insurance companies plan to stop underwriting of healthcare benefits in the near future. If

this happen, the cost of healthcare would rise up and some companies will have to take out

the health care benefits to their employees.

Another threat that also mentioned by the COO is the uncertainty of regulations and

policies. At the moment there is no specific law regulating the MCO in Malaysia.

Therefore, a new rule regulation may become a threat to PMC. Another threat is the

implementation of National Healthcare Policy (NHP) in Malaysia. The NHP has outlined

that every one thousand citizens will be assigned to one doctor. Thus, the doctor will know

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the history of the patient from day one. Therefore, the role of PMC as MCO is no longer

required.

3.4. PEST Analysis

To answer the second issue/problem in question, we conducted PEST analysis for both the

proposed international destinations for market expansion i.e. for Dubai (UAE) and for

Jakarta (Indonesia).

I. Entering UAE (Dubai)

Dubai has changed dramatically over the last three decades, becoming a major business

centre with a more dynamic and diversified economy. Dubai enjoys a strategic location

and serves as the biggest re-exporting centre in the Middle East. Its low logistical and

operational costs and excellent infrastructure, international outlook and liberal government

policies are attracting investors in a big way. Activities such as trade, transport, tourism,

industry and finance have shown steady growth and helped the economy to achieve a high

degree of expansion and diversification. In this report we identify the PEST analysis that

may help PMCare to develop the market in Dubai.

Dubai healthcare sector has grown rapidly over the last decade. However, currently

accounts for nearly 6% of the Dubai non-oil gross domestic product. Changes in medical

& computer technology, the structural delivery of care including managed care, and

demographics have placed health care among the most dynamic areas of the economy. The

sector is predicted to grow by 14% over the coming 5 years. The healthcare system has

many components, consumers, employers, physicians, hospitals, other providers,

pharmaceutical companies, and government all play a role.

a) Political factors:

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The UAE have a stable political environment, which force any businessman to open his

business here. It has very strong relations with other countries, it is a peaceful country. Its

low logistical and operational costs and excellent infrastructure, international outlook and

liberal government policies are attracting investors in a big way. Activities such as trade,

transport, tourism, industry and finance have shown steady growth and helped the

economy to achieve a high degree of expansion and diversification.

In addition to the fact that Dubai has experienced very little volatility from its expatriate

workforce, despite having a higher percentage of foreign labor than the Gulf average, there

has also been very little trouble from citizens. UAE customs applies integrated Customs

Tariffs rate of 4% of the CIF Value (Cost, Insurance and Freight). The Dubai health care

authority (DHA) has been empowered to set policy and strategy for health, and to assure

the application of that health policy and strategy. The (DHA) leads an integrated approach

across the spectrum of health, anticipating Dubai's future needs and being responsive to

users. It will stimulate growth and innovation in the health market, ensuring value for

money and quality of services through effective regulation. Implementation will be

completed in phases and will take around four years to complete (2012).

b) Economical factors:

The Dubai economy enjoys a competitive combination of cost, market and environmental

advantages that create an ideal and attractive investment climate for local and expatriate

businesses alike. In fact, these advantages not only rank Dubai as the Arabian Gulfs

leading multi-purpose business center with luxury Dubai property and regional hub city,

but they place it at the forefront of the globes, dynamic and emerging market economies.

The economic environment in Dubai based on free trade and it encourage the local and

foreign to invest their money in the Dubai. There are three factors affect the financial

investment in the UAE. Those factors are:

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1. Gross Domestic Product (GDP): UAE’s Gross Domestic Production (GDP) in 2010

will reach around $218.4 billion (Dh802.1bn), as compared to $170.7bn in 2007 and

$187.7bn in 2008. The GDP in UAE ranks second in the CCASG (after Saudi

Arabia), third in the Middle East—North Africa (MENA) region (after Saudi Arabia

and Iran), and 38th in the world (Malaysia 29th).

2. Interest Rates: The Central Bank is the bank that is managing and controls all the

banks in the country and issues the interest rate for them. Interest rate depends on the

demand of shares and also the business activities.

3. Inflation Rate: The inflation rate in Dubai in 2006 is 9.3%, rose to 10.9 % in 2007.

To incant investors there is no personal taxation in Dubai. Except for oil and gas-

producing companies that pay royalties and taxes on their proceeds and foreign banks that

pay 20% of their profits, there are no direct corporate income taxes; there are no

preservation taxes. In the free zones, enterprises are granted at least a 15-year tax

exemption guarantee regardless of the changes in the laws. The currency is fully

convertible and there are no taxes on the repatriation of capital or earnings. Further, there

are no foreign exchange controls, quotas or trade barriers and import duties and tariffs are

extremely low.

Tourism in Dubai is an important part of the Dubai government's strategy to maintain the

flow of foreign dollars into the emirate. Dubai's lure for tourists is based mainly on

shopping, but also on its possession of other ancient and modern attractions.

c) Social Factors:

In general, the social factors in the UAE have a great impact in determining the size of the

UAE labor force. The total population was estimated at around 4.48 million at the end of

2007 and is projected to grow (6.12%) to nearly 4.76 million at the end of 2008. Ethnic

groups are: Emirati 19%, other Arab and Iranian 23%, South Asia 50%, other expatriates

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(includes 8% Westerners and East Asians) and the literacy: Age 15 and above can read

and write. Islam is the official religion of the UAE with Muslim constituting around 96%

of the total population. Christians, Hindus and other religious groups form just 4% of the

UAE population, but have been granted freedom to practice their religious and cultural

practices. Arabic is the official language of the UAE; however English and several Asian

languages are widely spoken and understood all over the country.

d) Technical factors:

Dubai has frequently been referred to as the "most wired" nation in the Middle East.  The

users of IT include all facets of society: private consumers, businesses, government,

military, and educational facilities. Dubai Technology and Media Free Zone (DTFMZ)

established in 2000, consists of three main entities: Dubai Internet City, Dubai Media City

and Dubai Knowledge Village. The Free Zone is a home to hundreds of global companies

that serve technology, media and knowledge industry and more. It was established to

attract foreign venture and prompt commercial activity. In addition, companies can be

100% foreign-owned. Dubai Internet City is a strategic base for companies targeting

emerging markets in a vast region extending from the Middle East to the Indian

subcontinent, and Africa to the CIS countries, covering 2 billion people with GDP $ 6.7

trillion.

A new health information system, hospitals and clinics in the UAE will be connected via

an online network by 2011 to improve medical care and ensure patient safety. This

network aims to exchange and access to medical and health information between patients

and doctors as well as healthcare peers across the country. The new system promises to

avoid losing data, saving time and money, decreasing the waiting time for medical

appointments but most importantly has the ability to provide international medical second

opinion.

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e) Conclusion for Dubai:

To conclude, we can say that PEST Analysis of Dubai gives a good insight to make a

decision for PMC whether to enter into that market or not. Dubai has many key

advantages like; a very wealthy country mainly due to its modest population base and

huge oil resources. Yet, the most important key is the healthcare sector of Dubai is in the

special attention of its government, healthcare industry is going through drastic changes

under the new plan. Therefore, Dubai is an attractive business opportunity for PMC. This

opportunity is sensible to grab because PMC has the competitive advantage and necessary

expertise in this business. However, PMC needs to have a joint venture with a local

company to have local support in terms of financial and political support.

II. Entering Jakarta, Indonesia

Jakarta, formerly known as Sunda Kelapa, Jayakarta, Batavia and Djakarta is the capital

and largest city of Indonesia. It also has a greater population than any other city in

Southeast Asia. It was Located on the northwest coast of Java, it has an area of

661.52 square kilometers (255.41 sq mi) and a population of 8,489,910. The cities in

Jakarta consist of Jakarta, East, North Jakarta, South Jakarta and West Jakarta. The only

regency is Thousand Islands, formerly a sub district of North Jakarta.

Since 2004, Jakarta, while under the governance of Sutiyoso, has built a new bus system

known as "TransJakarta" or "Busway", and is now planning to expand the number of

routes. The city had hoped to establish its newest transportation system, the Jakarta

Monorail, in 2007, but the project was abandoned by the developer, PT Jakarta Monorail,

in March 2008. Jakarta is the location of the Jakarta Stock Exchange, the Bank of

Indonesia, and the National Monument, or Tugu Monas.

a) Political Factors:

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Indonesia has recently undergone significant changes in its political structure. Jakarta is

the capital of Indonesia and is a multicultural big city of the country. August 2007, Jakarta

held its first ever election to pick a governor; the election was won by Fauzi Bowo. The

city's governors have previously been appointed by local parliament. The poll is part of a

country-wide decentralization drive, allowing for direct local elections in several areas.

Officially, Jakarta is not a city, but rather a province with special status as the capital of

Indonesia. Jakarta has a decidedly cosmopolitan flavor and a diverse culture. Many of the

immigrants are from the other parts of the island of Java, bringing along a mixture of

dialects of the Javanese and Sundanese languages, as well as their traditional foods and

customs. It has also embarked on a massive decentralization that should improve the local

provision of public goods. In addition, the decentralization effort is taken also due to

resolve issues such as immigrants, congestion and lack of sufficient infrastructure

especially around Jakarta.

The Indonesian government is currently making efforts to restructure its banking sector

and offshore debt to facilitate its recovery from the crisis. It has recently produced a White

Paper that contains Indonesia's priority for economic policies, which if firmly

implemented would significantly improve the climate for productive private investment in

the country.

b) Economic Factors:

Indonesia is a market-based economy with GDP (PPP) $899bn (2005), GDP growth 5.6%

(2005), GDP per capita $3,700 (2005), GDP by sector agriculture (16.6%), industry

(43.6%), services (39.9%) (2004). A high Inflation (CPI) rate reported on 2005 noted

17.1%. The number of Population below poverty line is 27.1% (1998). A massive amount

on Labor force which is 105.7m (2004). Labor force by sectors is as follows:

manufacturing 46%, agriculture 16%, services 39% (1999). Undoubtedly huge percentage

in unemployment is by 10.3% (2005). Main industries in Indonesia is petroleum and

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natural gas; textiles, apparel, and footwear; mining, cement, chemical fertilizers, plywood;

rubber; food; tourism

During the economic crisis in Indonesia, the capability of the people became much lower

because of the lack of income. As the economic and political capital of Indonesia, Jakarta

attracts many foreign as well as domestic immigrants.

c) Social Factors:

The population in Indonesia is approximately 221 million and deemed the world's fourth

most-populous nation after China, India, and the United States. Jakarta as the nation’s

capital is the main economics activities centre in Indonesia. The increased economics

activities in Jakarta brought out the residential needs for the economics people. Over time,

the residential area has become overpopulated, but the need of the residential area is still

high in accordance to the ever growing urbanization flow to Jakarta.

UN estimates show that the country grows by almost 3 million people each year, with

much of the growth concentrated in urban areas that are already struggling to provide

social services. Fertility has been reported declining. Fertility is now close to three

children per woman, according to the 2003 World Population Data Sheet of the Population

Reference Bureau (PRB).

In recent times, conflict and violence in many of the country's provinces have displaced

hundreds of thousands of people. An estimated 600,000 to 1 million Indonesians were

displaced throughout the archipelago at the end of 2002, according to the U.S. Committee

for Refugees. Indonesia experienced some improvements in health care standards between

the 1960s and the 1990s, according to the United Nations Development Program (UNDP).

d) Technological Factors:

Role of the Indonesian government in strengthening technological capability (2006) still

need much attention. However, Patient record information system (PaRIS) for primary

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health care centers in Indonesia has been implemented recently. Technological

infrastructure is not good in the country as a whole. Competitor in managed care would be

an NGO from Australia, Ramsay Care based in Jakarta.

e) Conclusion for Jakarta:

PEST analysis for Jakarta (Indonesia) provides information for the decision for PMC to go

after the opportunity or not. Looking at the analysis, we can say that it is not appropriate

for PMC to expand its business into Jakarta because Indonesian market is very uncertain

in terms of political situation and infrastructure is also a problem there. For a medium size

company like PMC it can be very risky to do investment in Jakarta.

Therefore, on the basis of our analysis, we recommend PMC not to expand its business

operation in Jakarta.

4. Strategy Formulation and Implementation

As being discussed earlier, PMC is facing two major issues; first is to become an industry

leader and secondly the internationalization of business operations by looking at

opportunities in Indonesia and Dubai. Thus, being in the fragmented industry, PMC has to

apply strategies that can assist them overcome these issues and ultimately reaching their

objectives.

Regardless of the two issues, to sustain the growth of PMC, at Corporate Level Strategy,

Ansoff Matrix is applied by considering the market-product relationship. From the matrix,

we suggest that PMC to focus on Market Penetration strategy in order to increase its

market share which eventually position them as market leader. This strategy is less risky

since it leverages many of the company’s existing resources and capabilities. In a growing

market such as Malaysian managed care business , simply maintaining market share will

result in growth and there may exist opportunities to increase market share if competitors

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reach capacity limits.

Figure 3: Ansoff Matrix, the 2 strategies selected to address PMC’s issues

Whereas, at Business Level Strategy, the competitive advantage gained by PMC should be

fully utilized. In other words, PMC should use its competitive advantage in getting more

corporate clients and re-contracting the existing customers into new and longer terms.

Apart from that, PMC also need to revise their recruitment criteria and employees benefits

to reduce the problem of high staffs turnover.

In considering the expansion of business operation to Dubai, the Ansoff Matrix suggests

the Market Development strategy. This strategy includes pursuit of additional market

segments or geographical regions as what is being aimed by PMC. Development of new

market may become a good strategy if the firm’s core competencies are related more to the

specific product than to its experience with a specific market segment. Because the firm is

expanding into a new market, a market development strategy typically has more risk than

a market penetration strategy.

As mentioned earlier, we are suggesting for PMC to do a strategic alliance or joint venture

with the local company while maintaining and/or strengthening its competitiveness. PMC

should be physically exist in Dubai and supplying their expertise and knowledge in the

joint venture. The other party should provide the networking, financial and other physical

aspects.

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Therefore, since Dubai has different cultural background, we are also proposing that PMC

to adopt the Think-Local, Act-Local Approach whereby PMC’s competitive advantage

should be tailored and crafted to local needs and delegate the strategy making to local

partner who have the firsthand knowledge of local conditions.

Strategies can be formulated in three different levels:

o Corporate level

o Business Unit level

o Functional or departmental level

While strategy may be about competing and surviving as a firm, one can argue that

products not corporations compete, and products are developed by business units.

However, all three levels have their own importance and should be very carefully managed

by the company.

5. Evaluation & Control

Implementation of the formulated strategy must be frequently monitored to ensure

fulfillment of objectives of every planned actions. It is not uncommon that due to various

factors especially those conditions beyond the management control, certain planned

actions should be amended & perhaps the effect should also be analyzed. The current

global economic crisis or change in a government policy due to change in leadership of the

ruling political party are examples of the factors mentioned. Therefore management

should be very much aware to these situations in order to ensure no disruption of the

company’s efforts toward sustainability.

Based on the above-mentioned factors, the strategy implementation must be monitored

and relevant adjustments to be made as needed. There are certain steps that can be taken to

ensure effective monitoring and control. The steps are as follows :-

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1. Defining of parameters to be measured

2. Defining target values for those parameters

3. Measurement of performance

4. Comparison of the performed results & the pre defined standards

5. Changes & Adjustments to made if necessary

6. Conclusion

In conclusion, PM Care Sdn Bhd should prioritize its Malaysian business operations and

focusing on ways to maintain current share of the market as well as looking for

opportunities to increase it. As for foreign ventures, Dubai should be a good base for the

company to venture into with the best possible strategy is through strategic alliance with

Dubai’s local firm. It is utmost importance for PMCare Sdn Bhd to continuously monitor

and evaluate its business operations as it would be well prepared for any changes &

developments affecting the industry and economy as a whole.

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